CARD Act Study Finds Greater Transparency and Stable Pricing

A recent study by the Center for Responsible Lending found that not only have the new credit card rules mandated by the CARD Act of 2009 resulted in significantly greater price transparency for consumers, but, despite grim predictions, actual prices have remained stable and available credit has not tightened beyond what would be expected from the economic downturn.

The study, "Credit Card Clarity: CARD Act Reform Works," found that because price transparency fosters competition, the long-term effect of the CARD Act is likely to be lower costs for consumers.

In addition, new rules have reduced the difference between stated rates and actual rates paid on credit cards, resulting in more transparent pricing. An estimated $12.1 billion in previously obscure yearly charges are now stated more clearly in credit card offers. The study also found that direct-mail offers have been extended at a volume and pace consistent with economic conditions.

According to the study’s author, CRL Senior Researcher Joshua M. Frank, the findings refute negative claims by the credit card industry that new credit card rules have restricted access to consumer credit and raised its cost.

"These claims rely on limited data that do not accurately capture the cost or availability of credit extended to consumers," said Frank. "This study uses multiple data sets and methods and consistently finds that the CARD Act has not caused prices to rise or credit to constrict. Critics of reform often argue that common-sense rules and oversight inevitably lead to significant and negative ‘unintended consequences’ for consumers. The ongoing crisis in the mortgage market is an example of the harm the absence of common-sense rules brings. This report shows that, prior to the CARD act, the credit card industry was another."

He added that the new rules have benefited the public by making credit card pricing significantly more transparent, which is likely to lower costs long term by spurring competition and making it harder for issuers to manipulate or arbitrarily raise prices.